Whether you are 20 or 60 years old, time progresses in the blink of an eye and arriving at your desired financial situation at the point of retirement does not happen by accident. The phrase, wasted time is wasted money, holds a lot of truth, especially with super.
Individuals who effectively manage their super from a young age are more likely to achieve long-term financial goals than those who waste decades before taking appropriate strategic action.
No matter what age you are, if you want to do what is best for yourself, you must consider your level of financial awareness and seek appropriate advice and services where you have knowledge gaps.
Super is complex, and most people have knowledge gaps in this area but fail to take action early enough, thinking they will do it later, closer to retirement. A classic example of wasted time resulting in wasted money as they miss out on opportunities to significantly impact their super outcomes.
START EARLY
Whenever anyone starts their first job, an increase in financial awareness is required. Financial mistakes early in your career are common, and most people remain unaware of the damage they are doing long-term.
Two significant things happen when you commence working, you earn money and start accumulating super.
Initially, your super balance may seem small and insignificant, yet by the time you retire, if wisely managed, you can end up with around a million dollars in your account (in today’s dollars).
The golden rules of super are:
- Understand the super product you select and the various risks associated with it.
- Ignore marketing boasts and make decisions based on factual information and calculations.
- Wealth creation requires you to be in control of what you are doing, so you must have an appropriate level of financial awareness.
- Identify where you lack the necessary skills to manage your investment in super and identify a service that provides those skills.
- Consistently evaluate the performance of any super service you are paying for.
- Salary sacrifice a modest amount early in your career.
- Understand that your salary is the key driver of your super asset (the more you earn, the quicker your super will accumulate).
- If you want a promotion, improve your prospects by talking to your superiors about it and finding out what you can do to add value within your current role in the interim.
- Consider investing 100% of your super asset in shares and property (growth assets) whilst you have a long time horizon until retirement.
- Review the appropriateness of your super strategy annually and make relevant changes as required.
- Interact with your super as a personal asset early in your career.
- Set long-term goals and objectives and monitor progress against calculated milestones.
FOR THE OLDER GENERATION
I am sure you know by now that life moves quickly, and some of you will be wishing you had listened earlier.
Whatever you may have done right or wrong so far in life, you must take the perspective of learning from experience and facing reality as it currently is.
Just as there are golden rules for the younger generation, the older generation must ask themselves the following questions:
- Have I accumulated enough in super and other assets to retire on?
- What is the time horizon to my preferred retirement date, and how much super do I want to have accumulated by then?
- Are there risks that might damage my accumulated wealth and disrupt my plans from here?
- Is there a service that can assist me to grow my super wealth yet protect it from risks?
- What is my level of financial awareness?
- Do I know what I should be doing with my super from here?
- Do I have a robust strategy for managing my super until retirement for an optimal outcome?
- How much have I got, and given my retirement plans, how much is enough?
- Is there an alternative to expensive, traditional financial planning services that I could benefit from?
MOST AUSTRALIANS
Unfortunately, most Australians have limited experience and financial awareness before life after school/TAFE/university takes over, and they have to learn by making mistakes.
Traditionally, the financial services industry only serviced Australians who could afford to pay for expensive financial planning advice (approximately 20% of the top 20% of individuals classed by earnings and assets). Often, these financial planning services only talk to prospects if their assets are $3m or more, meaning that over 90% of the working population does not qualify for traditional financial planning services.
Generally speaking, most Australians do not seek to become financially aware, often choosing the path of doing their best but without the required skills, an approach that most often results in significant financial underperformance.
SUPER MANAGEMENT
If it is possible for almost everyone starting in the workforce today to accumulate a million dollars in super by retirement, how do you get there, and what common mistakes can prevent it from happening?
Misinformation is a word commonly used in recent times, and there is a lot of misinformation (i.e. misleading claims) in the superannuation market about what solution is best for everyone’s super. Super product providers do not service super at an individual account level, and, in some products, most individuals sit in the MySuper investment default and do so without understanding market risk.
The truth is that product providers only provide general advice to individuals and fail to fully explain the limitations and risks of their service model to the market. A product provider will never tell you that another super product is better than theirs, and this is why individuals need to access a service not aligned with a super product.
In searching for such a service, cost is a genuine consideration for most working Australians.
With the rise of technology and automation, quality advice and service specifically focused on super has become more affordable than ever. Look for a service that can review all super product options appropriate to your circumstances to optimise your super and, thereby, lifestyle in retirement.
SUPERWISER
Check out www.superwiser.com.au to examine the value proposition for helping you manage your super more effectively.
Alternatively, if you would like to speak to an adviser call 1800 467 467.
YOUR SUPER
Ten years ago, the government introduced MySuper as a regulatory requirement, and interestingly neither the government nor the regulator has criticised or noted any inadequacies in the design of any platform’s MySuper investment default option since then.
However, as a wealth creation strategy, it is observed that there are design flaws present within all MySuper offerings, which can lead to sub-optimal super outcomes for individuals.
There are three basic MySuper designs:
- A fixed investment strategy, is typically balanced between growth and defensive assets until the point of retirement.
- A glide path strategy, where the asset resides in a growth investment portfolio until a certain age, at which point contributions get directed into a lower-risk portfolio.
- Then there is the life stages/cycles strategy, where the asset is methodically and progressively de-risked into defensive assets after reaching certain ages.
Individuals must realise that MySuper is a generic (one-size-fits-many) super strategy (not an optimisation strategy), with age being the only personalised variable (sometimes) considered in the equation.
IS SUPER A NATIONAL ASSET?
Like the government making it a regulatory requirement for all platforms to name their default investment portfolio ‘MySuper’, the government is now stating that super is not only a personal asset but a national asset too, and suggests using it to invest in Australia.
At some time in the past few years, both major political parties discussed defining the purpose of super in law. The discussion did not progress to legislation, perhaps because super is a personal asset intended to provide income to an individual in retirement.
Throughout the Royal Commission in 2018, there was much commentary about platforms charging ‘fees for no service’, with little attention given to reviewing the appropriateness of MySuper designs as an optimal wealth creation strategy for individuals.
MySuper was designed more like a ‘safety net’ super strategy, catching those who fall through the cracks and fail to take ownership of their super asset. The high percentage of working Australians still in a MySuper default investment option is concerning.
The current government plans to use super to fund social housing and sort out the rental/homelessness crisis developed over the last decade, partly due to record-low interest rates and easy access to credit.
Globally, we now have a cost-of-living crisis, high government debt, high domestic debt, and an unstable geopolitical situation, signalling a less than healthy economy.
GOOD FINANCIAL MANAGEMENT
Many people who borrowed money for the first time in the last fifteen years have misunderstood what level of bank interest is ‘normal’.
Many Australians are struggling financially with interest rates returning to normal levels and the rapid increase in the cost of living resulting from high inflation caused by the flood of money that entered the economy due to unprecedented monetary policies enacted during the COVID-19 predicament.
Good financial management is hard to follow as it is not a lesson well taught in the Australian educational system, and most developed countries have the same standard of education when it comes to money management.
The first wise lesson is to expect the unexpected, live within your means (if you can) and practice discernment regarding political and media rhetoric about affordability.
Budget appropriately, identify any wasteful expenditure and ensuring you only spend what you can afford. A couple with a young family experience many financial pressures and it is probable that both adults will have to work.
Traditionally, the person most able to work and the highest paid will seek promotions to earn higher and higher dollars. This involves using initiative and seeking to add value above expectations, offering support and identifying how to assist those in management positions to meet their goals and objectives.
HOW TO OPTIMISE SUPER
Super is your asset, and you must optimise it (no one will do it for you). To do this, you must get to know your super and make sure it makes as much as possible in every market cycle, depending on your circumstances.
Time flies quickly, and you will find yourself in the latter half of your career before you know it, so it is recommended to take action to optimise your super sooner rather than later. Just ask someone older.
Top Tips for the Younger Generation (Under 45’s)
- When first employed, find a source of opinion that educates you away from bad habits that can damage your career and financial progress.
- Have your super contributions paid into a product you think seems right, but wait until you have accumulated enough of an asset to justify paying for personal advice.
- Initially, opt for cost-effective limited super advice (as opposed to expensive holistic financial advice).
- Examine the cost of the service against the value to be delivered and watch the performance of your account progress.
Good limited super advice will cover four areas:
- Choice of product.
- Cost disclosure.
- Contribution strategy.
- Investment strategy.
It will also provide milestones in performance so you can evaluate whether the promises were true to label (or not).
Top Tips for the Older Generation (Age 45+)
- Make additional contributions appropriate to your specific circumstances. A little over a longer time is better than a lot over a short time.
- Review the insurance coverage you have in force within super to ensure it still meets your personal needs. Consider that the older you get, the higher the premiums. You do not want to pay for insurance cover you may no longer need just as much as you do not want to be underinsured should you need to make a claim.
- Review and update your investment strategy every 12 to 24 months to ensure the right balance of growth and defensive assets reflects market conditions expected for the cycle.
For those aged 60 and over:
- Examine the opportunity to use a transition to retirement strategy to maintain your existing cash flow, salary sacrifice more into super, save on tax and increase your super balance.
SUPERWISER
The SuperWiser client portal provides access to affordable, expert advice and service specifically focused on assisting you to manage your super towards an optimal outcome.
SuperWiser can help you make informed decisions and avoid common (and often costly) mistakes.
Complete a free Super Review.
From there, you can obtain initial super optimisation advice (including implementation) for a one-off low cost of $220 (inc GST).
Alternatively, to discuss your options directly with an adviser, book a time online, call 1800 467 467 or email yoursuper@superwiser.com.au
OPTIMISATION
Super is a personal asset. To effectively manage super as a wealth creation strategy, you must determine what you want to achieve for yourself (also known as setting goals and objectives). You must also monitor your progress against your stated expectations and adjust your strategy regularly because the value of your super asset can rise or fall, depending on investment markets.
Optimising your super asset requires making regular, informed, timely decisions aligned with your circumstances and market conditions.
The process involves analysing the potential outcomes, benefits and risks associated with available options to determine what best meets your needs and brings you closer to achieving your goals.
Unfortunately, financial literacy among Australians is varied, and research suggests that many people struggle with more complex financial dealings such as investments and superannuation, putting a high proportion of working Australians at a significant disadvantage.
Super optimisation involves an array of skills such as:
- Analysis of current and future product capability.
- Comprehension of rules around contributions, concessional & non-concessional.
- Knowledge of global economics.
- Construction of investment portfolios suitable for expected market conditions.
- Determination of appropriate insurance requirements.
Individuals who try to acquire such skills to manage and optimise super themselves can find it is a full-time job.
The challenge is not only in skills acquisition but in ensuring the maintenance of knowledge as market conditions evolve.
The SuperWiser client portal intends to meet the needs of everyday working Australians requiring access to affordable advice and service to help them avoid making common super mistakes and optimise financial outcomes for themselves over the long term.
Unlike holistic financial advice that includes all facets of an individual’s financial situation and can cost thousands of dollars, SuperWiser focuses on providing advice limited to super and costs between $0 and $220 (inc GST), depending on requirements.
All individuals with a super account are encouraged to use SuperWiser, even if only to complete a free Super Review.
CHOICE
A common and often costly mistake many individuals make with super is assuming that their existing super product will always be appropriate for them.
Remember, your circumstances are never static and constantly evolve. A super product that was appropriate 5 years ago (for example) may no longer be so now, especially if your circumstances involve a change of employer.
With the introduction of choice, more and more individuals often make the choice to stay with their existing super product rather than move their super into their new employer’s corporate superannuation plan.
Individuals who exercise choice and do not elect to join their employer’s corporate super plan, on review, may find they have mistakenly put themselves at a disadvantage.
Medium to large employers can go to market and gain a discounted fee structure and possibly cheaper insurance premiums to the advantage of their employees.
Individuals who exercise choice must conduct an appropriate analysis comparing their existing super fund against their employer’s corporate superannuation plan if they are to make an informed decision.
POLITICS
The federal government has decided it will use the nation’s pool of super assets to fulfil political goals such as solving the housing crisis and funding changes in power generation to meet climate management targets.
While the government has a voice in doing this, it appears that the owners of the asset (i.e. every individual with a super account) are silent on the issue, or their opinion is unreported, as all political parties have adopted the same policy.
Is super really a national as opposed to a personal asset?
Despite the government’s significant interest in using the nation’s pool of super assets to fund political imperatives, most individuals remain somewhat detached from their super, preferring to look at it once each year at statement time.
Perhaps this is due to a lack of knowledge about how super can be better managed and optimised to exceed expectations as a source of income in retirement.
SUPERWISER
The SuperWiser client portal provides access to affordable, expert advice and service specifically focused on assisting you to manage your super towards an optimal outcome.
SuperWiser can help you make informed decisions and avoid common (and often costly) mistakes.
Complete a free Super Review.
From there, you can obtain initial super optimisation advice (including implementation) for a one-off low cost of $220 (inc GST).
Alternatively, to discuss your options directly with an Adviser, book a time online, call 1800 467 467 or email yoursuper@superwiser.com.au
Personal or National Asset?
Super is an important personal asset, but many people fail to take the time to understand it or optimise it.
It seems that our options for managing it are reducing, and that politicians are more often talking about it in a way that is carefully crafted to dilute the idea of super as a personal asset.
Unfortunately, the idea of super as a collective national resource is becoming more widely accepted.
Politics of Super
Discussions between super platforms and the government occur regularly around how to spend/invest the nation’s $3.5 trillion of total super, and current political opinion supports super being available for investment in politically essential infrastructure projects within Australia.
But is this type of investment in the best interest of the individuals who own the asset?
Superannuation products have different ways of investing your money. One important difference is whether they invest in unlisted (not publicly traded) or listed (publicly traded) assets. Some people claim that unlisted assets are less likely to go up and down in value compared to listed assets. However, it’s not yet clear if unlisted assets really bring in higher average returns than listed assets, and the regulator is unlikely to examine this matter.
The government’s super investments are not publicly traded and are only valued from time to time. Some of these investments are considered illiquid, which means they can’t be easily turned into cash, a factor not reported on and understood by the public so far.
To a large extent, the public seems uninterested in the concept of super as a personal or national asset. Subsequently, they suffer the consequences with a suboptimal asset balance at retirement.
SuperWiser
The public needs to become aware of what’s happening with their super and learn how to manage this important personal resource. The first step is to find a reliable source of information and make well-informed decisions. But the challenge is that many individuals can’t or won’t pay a lot of money for comprehensive financial advice. As a result, they end up making decisions based on marketing rather than real facts.
There is a need for a high-quality, low-cost alternative to holistic financial advice and SuperWiser meets this need.
The SuperWiser client portal is a unique offering within the financial services industry. It provides workers in the accumulation phase of their super journey with access to quality information, service and advice to help them understand and cultivate their super as a significant personal asset.
Optimising Super
Optimal super outcomes do not materialise by accident. You must set goals, implement a strategic plan, review regularly and make updates as conditions dictate. The SuperWiser portal helps you easily manage all of this.
The first step is for SuperWiser to review your current super strategy (or lack of) and use this to calculate your baseline projected income in retirement and provide an indication for improvement.
The initial Super Review is free of charge, with no obligation to continue.
Should you decide to continue, you go through a process of confirming product selection, establishing tangible goals and objectives, implementing contribution and investment strategies based on personal advice recommendations and provided with account balance milestone targets.
A one-off cost of $220 (inc GST) is involved with setting up your improved super strategy.
Optimising super is not a set-and-forget exercise. It requires considered and consistent, active management every 12 to 24 months. SuperWiser automatically notifies you to review your super and will recommend updates to your super strategy in alignment with your goals and objectives and as market conditions dictate.
A one-off cost of $110 (inc GST) is involved with updating your super strategy.
Employer Plan or Personal Choice
When you commence work with an employer, you must decide whether to join the employer’s super plan (if they have one) or make a personal choice as to which product you want your super contributions paid into.
It is essential to access relevant information on which to base this decision.
SuperWiser can help you work out if joining an employer plan would benefit you. Choosing to stay with your existing super product (because it’s the easiest thing to do) without first comparing the benefits of joining an employer plan can be a costly mistake.
Have a Look
For younger workers, review your super (at no cost) and see if there is an opportunity to do better than you expected.
For workers with twenty years or less left in the workforce, use SuperWiser to manage your super asset so it is consistently better invested with future market conditions.